Research On Performance Commitment Risk And Prevention In Mergers And Acquisitions

With the continuous improvement of the capital market,Chinese enterprises are also facing increasingly fierce competitive pressure.In the case of weak independent growth of enterprises,M & A,as an extension expansion strategy,is increasingly sought after by enterprises.In order to prevent M & A risks and promote fair trade,performance commitment has become a risk management tool chosen by many enterprises in M & A.The original intention of performance commitment is to protect the interests of listed companies and the majority of small and medium-sized investors in restructuring transactions,which can make up for the valuation bias under information asymmetry.In M & A activities,performance commitment plays a unique role,but it also brings a series of problems while preventing and controlling risks.The acquiree can show its confidence in its own assets through high performance commitment,and at the same time transmit the signal of high-quality assets to the market.Through the research and practice of scholars,it is found that performance commitment plays a certain role in promoting the successful completion of M & A transactions and motivating the target companies to improve their business level.However,in recent years,the failure of performance commitment occurs frequently,and its characteristics of high premium,high commitment and low compliance rate are exposed,which seriously damages market confidence.The problems brought by performance commitment cannot be ignored.In addition,the acquiree's management is prone to short-sighted behavior under the pressure of performance commitment,and may also achieve performance goals through earnings management.Based on the case study,this paper analyzes the information asymmetry theory,signal transmission theory,principal-agent theory and other relevant theoretical basis of the merger and acquisition of 100% stock rights of Prade by Dongfang Precision.Firstly,it combs the domestic and foreign literature,and then summarizes the development of performance commitment in China's merger and acquisition.Secondly,it introduces the merger and acquisition cases of Dongfang Precision,Thispaper identifies and analyzes the risks brought by Dongfang Precision during the application of performance commitment.The risks before the signing of performance commitment are mainly high valuation risk,performance goal setting risk,and the risks during the implementation of performance commitment are mainly earnings management risk,control risk,and dispute risk after the performance commitment fails to meet the standards.Finally,this paper makes a reasonable assessment In order to provide some reference and thinking for the listed companies to use performance commitment to avoid risks,the paper puts forward some suggestions on the following aspects: the value of the acquired companies,the reasonable formulation of performance objectives,the strengthening of control over the target companies,the enrichment of performance commitment assessment indicators,and the strengthening of restrictions on restricted shares.